Question

Find the compound interest on 4000 for 5 years at 10% p.a.

Give full explanation!
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Answer 1

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Find the compound interest on 4000 for 5 years at 10% p.a.

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→Principal (P) = Rs.4000

Since the interest is compounded yearly the number of conversion periods in 5 years are 5.

Also the rate of interest per conversion period (12 months) is 10% × 5 = 50% (0.5 in decimal) .

Thus the amount $\sf{A_n}$ (in Rs.) is given by

$\checkmark~\sf\purple{A_n~=~P~(1~+~i)^n~}$

$\longmapsto~\rm{A_n~=~4000~(1~+~0.5)^3~}$

$\longmapsto~\rm{A_n~=~4000\times{3.375}~}$

$\longmapsto~\rm{A_n~=~Rs.13500~}$

★The compound interest is therefore,

→ Rs. (13500 - 4000)

→ Rs.9500

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Answer 2

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★The compound interest is therefore,

→ Rs. (13500 - 4000)

→ Rs.9500